THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Which all goes to prove you can never forecast the result of any jury.

Good evening to you. Our top story tonight, the Ford Motor Company has become the first company to say it pull advertising from the "News Of The World" newspaper, as the tabloid investigates disturbing new allegations into a phone hacking scandal. Now "The Guardian" has accused the "News Of The World" of breaking into the voice mail of a missing 13- year-old school girl Milly Dowler, even deleting messages when it became full. Months later she was found dead. She had been murdered. Now Ford says it is pulling its adverts from the paper pending the "News Of The World" investigation into the allegations.

The U.K.'s largest retailer Tesco, which also advertises with the paper, says it is now a matter for the police. The editor at the time of the alleged hacking was Rebekah Brooks. She is now the chief executive of News International, the paper's parent company, and part of Rupert Murdoch's media empire.

Ms. Brooks says it is inconceivable that she could have known about these alleged hacks and insists she wants to stay in her current role to sort out what happened. The pressure on her and the advertisers is mounting though. Users on Twitter have been bombarding them with messages, urging them to pull their ads. News International executives have already met with the police.

Mill Dowler's killer was convicted for her murder only last month. It now appears nine years after she first went missing what is developing really shows a phone hacking controversy that has captivated Britain, as CNN's Dan Rivers reports.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN INTERNATIONAL CORRESPONDENT (voice over): The murder of (AUDIO GAP) year old school girl, Milly Dowler, in 2002 was a crime which appalled Britain. Last month her killer, Levi Bellfield was finally convicted. But now this story has collided with another major criminal inquiry that has dominated the news for years, phone hacking. The scandal relates to the illegal tabloid practice of accessing cell phone messages left for celebrities, in order to get stories. Now it seems Milly Dowler's phone was also hacked after she had gone missing. It is even claimed journalists deleted messages from concerns friends and family to free space on the mailbox and mine more messages for stories.

While in Afghanistan the British Prime Minister David Cameron was quick to condemn the behavior.

DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: On the question about the really appalling allegations about the telephone of Milly Dowler, I mean, if they are true, this is a truly dreadful act.

RIVERS: The lawyer representing Milly Dowler's family says they are starting legal action against the paper.

MARK LEWIS, DOWLER FAMILY LAWYER: The family are completely horrified. I mean, they thought this was all-they thought this was all over.

RIVERS: Until now the hacking of Prince William's phone in 2005, was the first known case resulting in a "News Of The World" journalist and private detective being imprisoned. But then other victims emerged. Sienna Miller was told that her had been hacked in 2006, just one of dozens of celebrities targeted. In January 2011, the former "News Of The World" editor Andy Coulson, who had already resigned from the paper over the scandal was forced to stand down again as communications director for the prime minister amid more allegations. Now news Milly Dowler's phone may have been hacked in 2002, suggests the "News Of The World" was involved in this illegal practice much earlier than previously thought.

It is putting huge pressure on Rebekah Brooks, who edited the paper in 2002, and now runs the parent company, News International. In a statement to colleagues she denies knowing about phone hacking, saying she is sickened by the allegations, adding, "If true, the devastating effect on Milly Dowler's family is unforgivable."

Her former boss, Les Hinton, has already been quizzed by a powerful committee of politicians, telling them phone hacking was the work of a lone and rogue reporter.

LES HINTON, FMR. EXECUTIVE, NEWS INTERNATIONAL: I believe he was the only person, but that investigation into the new editor continues.

RIVERS: But the committee chairman has never been convinced.

JOHN WHITTINGDALE, MEMBER OF PARLIAMENT: Well, we set up a time that the claims that were made to us, that this was the activities of one reporter, and nobody else had any involvement. We said then that we didn't believe that.

RIVERS (on camera): News International executives have been summoned to a meeting with detectives here at Scotland Yard. But the fundamental question remains, who in senior management knew about phone hacking and how long has it been going on? Dan Rivers, CNN, London.

(END VIDEOTAPE)

QUEST: Earlier I spoke to Paul Connew, he was the deputy editor at the "News Of The World" during the 1990s. And I asked him, given his knowledge of the paper, how the situation was being handled there?

(BEGIN VIDEOTAPE)

PAUL CONNEW, FMR. DEPUTY EDITOR, "NEWS OF THE WORLD": I think quite clearly that they're taking a personal interest in it. I think this one- the area of concern is going to be the reaction of the public. I think there has been a fairly ambivalent approach from the public, generally, about the hacking issue. It has been seen as a rather media story. Westminster Village story, when it is about celebrities and even politicians. But now this is taking it onto a different plane, with a lot of impact, you know, from concerned members of the public. In fact, phone in programs very hostile.

QUEST: But it has all come one step further in the sense that it now goes to the root of a major international media company, doesn't it, NewsCorp? And Rupert Murdoch will have to be taking this very seriously.

CONNEW: Indeed. It has come at a very sensitive time, too, with the Sky takeover, waiting final approval. But at the same time the "News Of The World" is a very small part of NewsCorp. And I don't think that one can really believe that there can now be any change in the go ahead for, in principle, for that takeover.

QUEST: Should Rebekah Brooks, the chief executive of News International, U.K., should she resign? She was the editor of the newspaper at the time.

CONNEW: Rebekah is very insistent that she knew nothing about hacking, as was Andy Coulson. She is obviously in a very delicate and difficult position because some people would argue that the mere fact that you were the editor, and if you didn't know what was going on, you should have done. But that is-you know, Rupert thinks very highly of her. So that is possibly survivable. If it is a question that she did know, and it emerges that she did know-

(CROSS TALK)

CONNEW: That is different matter.

QUEST: Completely.

Now, we have this week's edition of the "News Of The World". I have to be careful as I open it, lest the viewer gets a shock. But one thing we do have, an advert from T-Mobile, the Halifax Building Society; lots and lots of adverts for airlines, for travel companies, for particularly mobile phones, and indeed, car companies. We know Ford is withdrawing. We know Tesco is considering. How big a role will the advertisers play in pushing this issue forward? If they say we are going to pull our adverts?

CONNEW: That would obviously ring alarm bells. There have been previous occasions, "The Daily Mirror" had a-and the "Sunday Mirror" had a problem in the past when they printed some photographs secretly taken of Princess Diana, a huge reader backlash, and advertiser backlash. There is now-it is now a different age, when in fact social media campaigns are being built up and obviously rival media organizations, with an anti- Murdoch agenda, are obviously ringing around advertisers saying, say, you are still advertising with "News Of The World"? So obviously there is a momentum there. And that will obviously be causing great concern. At the end of the day, I think Rebekah's position will be governed by Rupert Murdoch and how he feels, the public, the politicians, readers, and advertisers are reacting.

QUEST: All right. So, pulling the strands together for us, if you would? What is going to be the defining point in this scandal?

CONNEW: I think the defining point is there is more and more emerging. We don't know what the true position is. We don't know really who Glenn Mulcaire was actually answering to; whether there are executives down the line who lied or concealed things from their editor. You know that is obviously one of the key questions that both the police inquiry and I presume the News International internal inquiry is trying to get to the bottom of. I think we have not heard the last of this by any means. By that I mean, there is obviously a debate in the Commons tomorrow. But I think even the Mulcaire files are being poured over. Who knows what else could emerge.

QUEST: Paul Connew, former deputy editor of "News Of The World".

When we come back in a moment, the modern epidemic that is endangering the global economy-debt. If you live in Europe or the United States you are used to it. It is catching. Maybe China is next.

(COMMERCIAL BREAK)

QUEST: Tonight desperate deal making is underway on two continents and the common disease in both, in Europe and in the United States, is debt. Even China is not immune. Each economy, like ships staying afloat because of and in spite of, a vast sea of debt, that is just about everywhere. Everyone can make progress as long as we don't become swamped. And right now there is a dire risk of any one of these boats springing a leak.

Start with United States. The U.S. Senate is back to work today, straight away after the July the Fourth holiday. The Treasury is desperate for a result and a deal by August 2, even sooner, if possible. Right now there is no sign of deadlock-of the deadlock being broken. Republicans want only spending cuts, Democrats want higher taxes, and the whole thing is well and truly deadlocked.

Of course, Greece is the source of Eurozone. You may have austerity and a European package, but now there are meetings to talk about how to rollover the bank debt. Apparently the "Financial Times" says tweaks there are to rollover $43.5 billion in debt. But what everybody is hoping to avoid where Greece is concerned, (UNINTELLIGIBLE) comes a default, selective, impartial and impairment, or whatever.

This is interesting. In China, which has a large current account surplus, but now there is a warning over bad debts. Bad local government debts are growing. The national government allowed easy credit to keep things pumped and moving. Lending went to local governments which are now in some serious trouble indeed. The debt could be $10s if not $100s of billions. Put that into perspective, the U.S., Europe through Greece, and China, and you start to see exactly how this debt crisis is really starting to come together.

Now, the pressure is mounting. This time it is on Portugal. Moody's has downgraded the sovereign debt rating of the country, B, double A1, to Ba2, negative outlook. Which means it could get worse. That is still largely above Greece's. Moody's says there is a growing risk that Portugal will need a second round of international rescue funds, and doubts their ability to cut the deficit.

So, the similarities between the U.S. debt position and that in the European Eurozone. Gideon Rachman is the chief foreign affairs columnist for the "Financial Times". His verdict on the crisis, America and the-U.S. and Europe are in the same sinking boat. A short while ago he joined me. I asked him how he came to that conclusion.

(BEGIN VIDEOTAPE)

GIDEON RACHMAN, "FINANCIAL TIMES": Yes, it struck me. I was actually reading my own newspaper, the "Financial Times" and I just worked my way through a whole page on the Greek debt crisis and turned over and there was a whole page on the debt ceiling debate in America. And I thought, you know, this is the same story essentially. It is a story about heavily indebted Western countries that are struggling to control their public finances, not very successfully. And they are experiencing political gridlock.

QUEST: How far though, did the crash of 2008, the Great Recession, really put force this into very clear relief? The idea of when the tide goes out, you have discovered who is truly naked?

RACHMAN: Yes, I think that is right. I mean, I think there were long-term pressures on the public finances anyway, because of the retirement of the baby boom generation, but then you get the crash. And you get the sudden doubling in debt to GDP ratios in the U.S., in Europe. And so it has suddenly become much more urgent.

QUEST: And yet the U.S., everyone says, shouldn't be having deficit reduction just yet, but have a path to it in the future. Why isn't the U.S. being punished yet for its high debt?

RACHMAN: Well, I think it is partly because Europe is in such bad trouble. That you know, people who want to get out of the dollar, where do they go? The euro is probably too strong anyway, given the euro debt crisis. And there is a limit to the amount of money you can put into Swiss francs or Singaporean dollars. And so, people are include to give America the benefit of the doubt.

QUEST: But the core point there is the benefit of the doubt. Because what happens with the benefit of the doubt is it eventually evaporates.

RACHMAN: Sure. I mean, what the Americans are aware of is there is already a very live debate about how much longer can the dollar be the reserve currency of the world, essentially, with these staggering debts building up. And people, it is not going to end tomorrow. It may not end for a few years. But at some state, unless America gets control of its public finances there is a threat to the reserves space of the dollar (ph).

QUEST: When we talk about a crisis of the debt ceiling, do you believe there is any realistic possibility of a default?

RACHMAN: Well, it depends, you know, why it is partly alarming that they are actually debating in Washington whether it would constitute a default. And that is in a sense a sign of the danger because I think the people-

QUEST: In terms of a-in terms of saying to bondholders, we are not going to pay you now, we'll pay in six months time, or we'll pay you when we get the money in. Everybody knows they'll get the money. It is just not today.

RACHMAN: Yes, I mean, I think there is a realistic possibility that they won't get a deal by August 2. And then we see what happens. And they are, in a sense, playing chicken with the markets.

QUEST: If you had to take the debt crisis in Europe, or the debt crisis in the U.S., which is the most serious?

RACHMAN: I'd rather it be American to be honest. I mean, the debt to GDP ratio is not as frightening yet and the American economy is that much more vibrant. And the European, the whole problem of the Euro and the way in which it yokes together very weak economies with very strong economies, without a proper institutional structure, is pretty difficult and dangerous to untangle.

(END VIDEOTAPE)

QUEST: Gideon Rachman of the "Financial Times".

The ringing phrase, "you will be able to count on me". Those are the words from Christine Lagarde to her new team on her first day at the IMF. France's former finance minister is now the first woman to head up the fund. She'll hold her first press conference on Wednesday. On the agenda, working with the EU and European Central Bank to help debt-stricken Greece. The IMF itself has been rocked by controversy surrounding, of course, its former chief, Dominique Strauss-Kahn.

Lackluster picture for stocks, wary about Greece, caution after getting (UNINTELLIGIBLE) last week.

(DESK BELL CHIMES)

And we are just off 22 points. Still comes to be over 12,500 and just a minor move.

In Europe stocks ended the Tuesday lower, uncertainty over Greece. There was hesitant trading on (UNINTELLIGIBLE). All in all, there was no real-as those numbers show, no real reason to do much at all. It was a big of a nothing for the day.

The World Trade Organization has read China the riot act and says Beijing's export restrictions on rare earths materials are illegal. It can't be justified on environmental grounds. China's restriction on these materials by 35 percent last year; no surprise for the rare earths outside of China has jumped as much as tenfold in price over the past year.

These 17 minerals may be rare, but they are basically everywhere. They are used to manufacture everything from computer hard drives to plasma screens and more than a 1,000 car parts. The European trade commissioner welcomed the decision by the WTO. Shortly after the decision came out I spoke exclusively to Commissioner Karl De Gucht, and began by asking what will happen if China refuses to abide by the ruling?

(BEGIN VIDEOTAPE)

KAREL DE GUCHT, EUROPEAN TRADE COMMISSIONER: Well, first of all, it's really a victory that we got there together with the U.S. and Mexico. But this, of course, in a first instance, yeah? So they can go into appeals to the appellate body and then we will have to wait until the end -- until we have the final result. But I trust that it will be the same. But in any case this is the first instance.

What we will do now is discuss with China how to put this into practice. And I think it's -- will also give us leverage for the so-called rare-earth materials where a similar problem -- where we are facing a similar problem. But we cannot yet have a retaliatory action against them as long as there's no final decision, of course.

QUEST: But at the moment there is a final decision, if there isn't a change in policy, you're not against going for retaliatory action?

DE GUCHT: What we will do is we will discuss this with the Chinese. I'm going to Beijing next week. And as the decision is now officially out, we will certainly discuss it with them. And I hope that we can convince them that they have to change their policy. But if they continue like this then we will not hesitate to take action and we will certainly consider retaliatory action, yes.

QUEST: The panel pretty much got rid of the environmental arguments and the domestic arguments. Commissioner, what do you think the Chinese were up to with this export restriction? What were they hoping to gain, do you believe?

DE GUCHT: Well, that's, of course, interpreting what on other minds. But there was certainly a part of the industrial policy behind this, that companies, industries, be they from the United States or from Europe, should establish in China, a transfer of intellectual property and make jobs for the Chinese people. But, of course, losing jobs in the U.S. and the EU, so that is not acceptable, that's why we are arguing that there should be a level playing field so that companies do not -- are not obliged to move to China.

QUEST: Finally, the process took many years, as it always does at the WTO. Commissioner, do you ever despair in your daily work life, at the sheer length of time these WTO panels take to deal with things?

DE GUCHT: Well, I think we should take care in criticizing the WTO because first of all, the WTO is establishing a legal order. I mean, it's putting obligations on the Chinese and we can act on the basis of that. And on the other hand, this is not a simple case. I mean, if you read the panel report, it's rather a big turf (ph) of work, you know? So it's too easy, I believe, to criticize an international institution that has, at least, the power to act and has the power to forbid certain practices. So WTO is very important for open trade.

(END VIDEOTAPE)

QUEST: The EU trade commissioner talking to me earlier.

Remember, we are never more than a click or Tweet away from you to find us. We're at Facebook.com/cnnquest. And there you will see exactly how we put this whole program together. You can always Tweet me. It is @RichardQuest.

And that is a shortened, but just as worthwhile QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you are up to in the hours ahead, I hope it is profitable. Piers is after the headlines.